William Davidson Institute Working Paper 487
Second, an important precondition for BS effect availability is to have a
convergence tendency of the non-tradable sector’s wages (which is lower) to the wage
level in the tradable sector (WT > WNT). The general dynamics exists and it is illustrated
in the following figure.
Figure 6. Wages dynamics in the tradable and non-tradable sector (trend, the
orthogonal axis is in BGN)
wages tradable ------wages non-tradable
And this tendency is justified by the correlation between the wages of two sectors
(0.86). In spite of the observed trend of smoothing, this process is very volatile in the
recent years (figure.7). Regardless of the index of relative wage, defined in our case as
the ratio “wages in the non-tradable/wages in the tradable sector
WNT
WT
”, which points to
1 (see the trend), we shall check whether growth rate of the non-tradable wage is
determined by the growth rate of the wages in the tradable sector.
20
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